Retrospective cancellation of seller registration cannot defeat input tax credit validly availed by a purchaser relying on the existing certificate.

Retrospective cancellation of a seller's registration does not, by itself, justify reversal or denial of input tax credit already availed by a purchasing dealer who acted on the strength of a valid registration certificate then in force. The court applied the principle that a buyer is entitled to rely on the seller's existing registration when the transaction was made, and a later retrospective cancellation cannot prejudice that position. Following the earlier binding view, the denial of input tax credit on this ground was held unsustainable, and the assessment orders were set aside to that extent.

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Issues: Whether input tax credit already availed by a purchasing dealer can be reversed or denied merely because the selling dealer's registration was cancelled retrospectively.

Analysis: The dispute turned on whether retrospective cancellation of the selling dealer's registration could affect a purchaser who had bought goods from a registered dealer and had availed input tax credit on the strength of the registration certificate then in force. The governing principle applied was that a purchasing dealer is entitled to rely on the seller's valid registration certificate, and a later retrospective cancellation cannot operate to the prejudice of a person who acted on the basis of that existing registration. The Court followed the earlier binding view that reversal of input tax credit cannot rest only on retrospective cancellation of the seller's registration.

Conclusion: The denial or reversal of input tax credit on the ground of retrospective cancellation of the selling dealer's registration was not sustainable, and the issue was decided in favour of the assessee.

Final Conclusion: The assessment orders were set aside to the extent they denied input tax credit on this ground, and the writ petitions were allowed.

Ratio Decidendi: Retrospective cancellation of a seller's registration does not defeat the input tax credit lawfully availed by a purchasing dealer who acted on the strength of the registration certificate while it was current.

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